September 22, 2021

Credit Card Preapproval vs. Pre-Qualification | Personal-finance

Preapproval has a different meaning with credit cards

With installment loans, such as mortgages and car loans, the difference between pre-qualification and preapproval is more clearly defined, and it’s not uncommon for consumers to go through both as they get closer to a decision. As you start looking for a house, for example, pre-qualification gives you an idea of how much you’ll be able to borrow. Getting preapproved allows you to make a firm offer to the seller when you find what you want.

With credit cards, on the other hand, you don’t typically need that kind of advance approval. So pre-qualification is much more common that true preapproval. In fact, receiving an unsolicited guarantee of approval from a credit card issuer can be a red flag. That’s because some issuers promise preapproval in the hopes of selling you on a card you don’t necessarily need or want.

Preapproved credit card offers may come from an institution where you’re already a customer, in an effort to get you to open another card. Or they may come from issuers that specialize in “instant-approval” cards, which tend to carry extremely high fees.

Review any preapproved credit card offer you receive skeptically before applying to make sure it’s the right choice for you.

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